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Oracle Kills Virtual Iron

Posted by kdawson on from the all-your-VMs-are-belong-to-us dept.

rhathar writes in with news that Oracle is killing off the products of Virtual Iron, a month after purchasing the company. Reports say that all but 10 to 15 staff were let go. The Reg article speculates that Oracle bought VI for its technology and considers its customers and partners expendable. When the Sun purchase finalizes, Oracle will be in possession of three separate virtualization technologies all based on Xen. "In a letter to Virtual Iron's sales partners, Oracle says it 'will suspend development of existing Virtual Iron products and will suspend delivery of orders to new customers.' One partner said, 'So basically, anyone that built their hosting infrastructure on VI... is now totally in the s–.'"

31 of 189 comments (clear)

  1. Yet another IT company gets to live my dream! by tjstork · · Score: 5, Interesting

    I would so love to be Virtual Iron, or anyone who got bought out like that. Geez, they buy me out, then tell me, that, I really am not allowed to work on it any more and can just take off for a few years, here's your millions of dollars.

    Yeah... SWEET!

    --
    This is my sig.
    1. Re:Yet another IT company gets to live my dream! by Anonymous Coward · · Score: 5, Interesting

      Yeah yeah. Great for the 2 or 3 guys on the top. Everyone else gets fucked though.

      Even if you have a small equity stake in a company that gets bought, the guys at the top will always cheat you out your share. Saw it happen many times during the first dot com bubble.

      What usually happens is the original owners have a handful of class A shares, and everyone else has class B shares. When the buyout comes around, the owners create and issue a billion (or so) class B shares, and dilute everyone else's interest. OR they simply vote with their (super voting power) class A shares and force everyone to sell the class B shares back at a reduced rate. Or they just sell the assets of the company, and not the company itself... then give themselves huge "bonuses" for making the sale.

    2. Re:Yet another IT company gets to live my dream! by tjstork · · Score: 2

      That sucks. I would like to think that if I made a millions selling a company with 50 people in it, the I would hook up the guys that got whacked who helped make it possible.

      --
      This is my sig.
    3. Re:Yet another IT company gets to live my dream! by mzito · · Score: 5, Informative

      Heh. Well, so, that's not exactly how it works. They had raised something around $60-70m in three or four rounds, including one round that involved firing/departures of most of the original founders, a new management team, and a totally new business focus.

      So first of all, every time you do a round of fundraising, you create new shares of stock. Let's say my company has 100 shares of stock, and you're a 10% owner of stock - that means you own 10 shares of stock. When we want to raise money, we go convince an investor that our company is worth $100,000, or $1000 per share, making your shares worth $10k. We then have the investor give us $100,000, we create 100 new shares of stock, making the company worth $200k "post-money" - but now you only own 5%, and your investors own 50%. On top of that, the investors might say, "hey, we want liquidation preference, or participating preferred" - complex subjects that can't be delved into here, but suffice it to say that gives them more power.

      Ok, time goes by - you spend that $100k you've raised, and while business is not terrible, it's not as good as your investors had hoped. You go back to get more money, and they say, "Sure, we'll give you another $100k, but we really don't think the company has progressed like we'd hoped, so the total company is worth $150k pre-money" - whoops, now your shares are worth $7,500. And after another 133 shares are created, you now own around 3% of the company.

      See how fast individual ownership can drop? Now, let's extend this factor to someone like VirtualIron who was raising $10-25m *every time* they raised money, and changed business models once. You can bet that by the time they went through four rounds of funding, the VCs owned almost all of that company. (By the way, I realize that this is only the most simplistic model of how companies fund operations through VCs, so don't yell at me - I don't have the space to talk about every option).

      According to some papers that had been leaked to the nytimes, in 2008 they did $3.4m in revenue and lost something like $17m on that $3.4m. How much can that company be worth? Typical rule of thumb in tech stock transactions is 5x-12x revenue, depending on a variety of factors. Given that it cost them $17m to make $3.4m - one could see how the multiplier is not gonna be so favorable. Let's make it 6x - that's $20m.

      So, you have a company where investors have sunk and lost $60m, fired management at least once, changed business models once, changed products at least once, and in the end, they're getting bought for between $16-32m. Do you think that anyone got more than a "thanks for selling this dog of a company" bonus?

      It's a shame, and I feel bad for the employees, but this is not a tech success story.

      --
      me@mzi.to
    4. Re:Yet another IT company gets to live my dream! by tftp · · Score: 3, Informative

      Here's your millions of dollars, we'll keep the hundreds of millions you could've made in the next years if you weren't so damn short-sighted.

      The seller knows about this. You don't get to sell a company for $Nm by being stupid. However there are many reasons why people sell stuff and why other people buy stuff. For example:

      • The owners want to retire.
      • The owners burned out.
      • The owners need money, now.
      • The company has problems and unless sold it will close its doors soon
      • The owners foresee difficulties ahead (financial crisis, for example)
      • The owners know that they reached the end of their road, technologically speaking
      • The owners know that they are no good as marketeers and will never be able to increase revenue
      • The owners know that without a big cash infusion they can't develop new product, and they can't get that financing on any reasonable terms
      • The owners know that once smoke clears their company won't be worth as much (or anything)
    5. Re:Yet another IT company gets to live my dream! by witherstaff · · Score: 2, Insightful

      It'd be great if by the time you were able to sell out you weren't in bed with the devil already. It's hard to grow any company without bringing in some sort of wealthy partner or group of investors. The reason why most new businesses fail within 5 years, even those that have a good product or service, is undercapitalization. Once you bring in the money the rules change drastically.

      The fortunate entrepreneurs that are successful the first go around and have it in them to self fund another company are very rare. Being altruistic and very successful in business don't often seem to go hand in hand. Although from my experience the honest geeks actually make decent deals like you say, often times screwed up by the rest of the corporate world.

    6. Re:Yet another IT company gets to live my dream! by e9th · · Score: 3, Interesting

      Such people do exist. Like this bank president. Yes, bank president.

    7. Re:Yet another IT company gets to live my dream! by Thing+1 · · Score: 5, Insightful

      This is OT, but needs to be said. My workaround for getting rid of that fucking annoying vertical and horizontal gray bars, and friend/foe circle icons, has now stopped working. It used to be that I could click any post in the story (i.e., "#28404197"), and then click the story link at the top of that page (i.e., "Oracle Kills Virtual Iron") to get back to the story with no disgusting graphics interrupting the flow of the beautiful words.

      Now, that has stopped working as of this morning. So: fuck you, Slashdot. Burn in hell for all I care. I'll read you a lot less now than I used to. No, I'm not saying I'll stay away forever, but as soon as your continued idiotic refusal to fix basic layout bugs annoys me, I will stop reading. And that's about 5 or 6 posts into most stories.

      If this is supposed to be an incentive to get me to try some other layout, FUCKING TELL ME! Don't just break shit and hope that I know how to "upgrade" to fix it.

      --
      I feel fantastic, and I'm still alive.
    8. Re:Yet another IT company gets to live my dream! by dookiesan · · Score: 5, Interesting

      Thank you for saying what so many are afraid to (for fear of offtopic mod)

    9. Re:Yet another IT company gets to live my dream! by Anonymous Coward · · Score: 2, Informative

      Here are my work-a-rounds for Slashdot in the order I use them.

      1. Use Firefox and install Greasemonkey and Greasefire addons. 2. With the addons installed, go to slashdot and right click the little Greasefire monkey head in your taskbar. 3. In the right click menu, you'll see some shit that says something like "48 scripts available." Click that. 4. On the thing that pops up, install "Slashdot - Remove Title Prefix", Slashdot - Expandable Comment Tree", "Only Slashdot News/Comments", "Slashdot Facelift", and "Slashdot - Single Page View" 5. After you do that, making sure you are using the old comment mode, go to the story you want to read and just click the "Change" button for the comment threshold, even if you are happy the current threshold. Any story you read from now on, just get into the habit of clicking that Change button and all should be well. 7. ??? 8. I guess PROFIT!! or something.

    10. Re:Yet another IT company gets to live my dream! by michaelhood · · Score: 2, Insightful

      create and issue a billion (or so) class B shares, and dilute everyone else's interest

      How is this even legal? If you own 5% of the company, you own 5% of the company, and "diluting" that would be theft.

      It's never, ever that simple.

      There are virtually always multiple classes of shares issued. Also, they might only hold warrants or options rather than actual stock.

      There could be anti-dilution or redemption rights attached, but if they (the employees) don't know to look for these things, there won't be.

    11. Re:Yet another IT company gets to live my dream! by cshay · · Score: 2, Informative

      My workaround was to direct Adblock to simply block the grey bars. As an intelligent Slashdotter, you DO use adblock, don't you?

    12. Re:Yet another IT company gets to live my dream! by open4energy · · Score: 2, Insightful

      This is OT, but needs to be said. My workaround for getting rid of that fucking annoying vertical and horizontal gray bars, and friend/foe circle icons, has now stopped working. And that's about 5 or 6 posts into most stories.

      I guess no one explained that poor language is simply the lack of intelligence to think of meaningful words to express yourself. But to the adblocks, why does the person suggest we not watch the ads? We are getting all this for FREE - is it too much to give a little of our precious moments to read an ad. No wonder the head guys are so mean to the lower ranks, look at how we are behaving down here! A respectful but ashamed open source evangelist

  2. But Open Source if flakey and you cannot rely... by Anonymous Coward · · Score: 4, Funny

    But commercial software is oh so much better as it has guaranteed support and you can rely on in and they have roadmaps and shit.

  3. NOT totally in the s--- by Anonymous Coward · · Score: 5, Funny

    VI customers could just switch to emacs.

    1. Re:NOT totally in the s--- by Savage-Rabbit · · Score: 3, Funny

      VI customers could just switch to emacs.

      HERETIC!!

      --
      Only to idiots, are orders laws.
      -- Henning von Tresckow
  4. Oracle is not IBM. by reporter · · Score: 5, Interesting
    After Oracle agreed to buy Sun Microsystems, many analysts claimed that Oracle intended to become another IBM by selling all components in the typical server room and by supporting those components with the same kind of high-value customer service.

    Well, the analysts were wrong. Without warning, Oracle just abruptly terminated a product line on which its customers may have built their entire information-technology infrastructure. This kind of approach to customer service is not how IBM treats its customers.

    Look at how IBM handled the sunsetting of OS/2. IBM issued a warning long in advance of ceasing sales and distribution of the product. Then, after the termination date, IBM continues to sell service contracts to support the product if a customer continues to need support.

    Hmmm. Maybe the time has come to short my Oracle stock.

    1. Re:Oracle is not IBM. by (H)elix1 · · Score: 4, Insightful

      This is not a fair product comparison: OS2 vs VI's end of life. Both companies buy product, in some cases to integrate, others to remove competition, and others yet again to just own the customer base. Expect the same careful moves when the database gets put down someday.

      I'm willing to bet it will play out more along these lines... For existing customer who already own the product, Oracle will support them for as long as they are willing to pay for support. For those who did not buy yet - sorry, no product can be bought anymore. For previous partners, a tough break. Continue to sell services to existing customers, but don't plan for any new customers. Now would be a very good time to rethink product - any of the other VM products - and see if there might be a reasonable match to what they were doing.

       

      --
      +++ UGUCAUCGUAUUUCU
  5. Don't forget VirtualBox by somenickname · · Score: 4, Interesting

    Though probably not for data center use, VirtualBox would add a fourth virtualization technology to their list. I'm more interested to see what they do with VirtualBox than what they do with all their overlapping Xen offerings.

    1. Re:Don't forget VirtualBox by erroneus · · Score: 3, Interesting

      VirtualBox is really for the desktop... or developing VMs for the enterprise, which is where I hope they go with it. I really like VirtualBox. It's free, does everything I need it to do and has replaced my use of VMWare Workstation nicely. If VMWare Workstation were free, I'd switch back.

  6. Re:Another reason why VMWare is the... by saleenS281 · · Score: 3, Interesting

    ...VirtualPC is still around. But it was NEVER aimed as an enterprise virtualization solution, so I'm not sure why you would even bother to bring that up. I can only question your knowledge of the subject. Citrix Xenserver and Microsoft's Hyper-V are here to stay, and are VERY viable long-term solutions. In fact, more viable than VMware because they aren't a one-trick pony. Both company's can and will continue to make money if virtualization technology becomes a commodity, and with the ground MS is gaining with Hyper-V, that is a VERY real possibility.

  7. Re:Totally in the s--? by Senjutsu · · Score: 4, Insightful

    Any transition offer that involves subjecting oneself to Oracle's pricing plans can accurately be described as being up shit creek.

  8. Re:Another reason why VMWare is the... by Anonymous Coward · · Score: 2, Insightful

    Come talk to me in 5 years when your viable long term solution providers have decided that their product line is not profitable enough and kill it off. That is what happens when a company's products are not a one-trick pony.

  9. Purpose of open software by noidentity · · Score: 4, Insightful

    In a letter to Virtual Iron's sales partners, Oracle says it 'will suspend development of existing Virtual Iron products and will suspend delivery of orders to new customers.' One partner said, 'So basically, anyone that built their hosting infrastructure on VI... is now totally in the s--.

    This is a good example of the purpose for requiring that you have access to and can compile the source code to the software you're using. If the current developer decides to close shop or has it closed for them as in this case, you can just take ths code to another developer or set up a new shop, rather than be totally screwed like this.

    1. Re:Purpose of open software by jd · · Score: 3, Interesting

      It's also a good example of why being a company "likely to be around for a while" isn't worth a damn. Mergers and buy-outs happen, to small companies and large, and it renders all those nice platitudes as to why commercial products are so much "safer" to go with into meaningless drivel.

      --
      It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
    2. Re:Purpose of open software by omz13 · · Score: 3, Insightful

      The funniest part is that the OP was probably dead serious when he wrote that. If this is a "good example" of anything, it's an example of why having the source code doesn't buy ordinary people diddly squat.

      So true! Years ago when I worked at a software house our CEO was paranoid about the source code... he wanted it locked away as he was afraid our "competitors" could get it. Now, there were a few problems with this. Our customers got the source code when they bought our system, since it needed to be compiled on their systems (as no two customers had the same configuration). Also, we didn't really have any competitors. Now, the joke is that even though our customers had the source, and the security blanket that should our company go down they could continue, the customers could do no more than compile the code. The real knowledge was locked in the heads of the programmers who knew HOW and WHY everything was put together in the source code... and, sadly, this is something that is still overlooked. The source isn't everything, but just part of it, and most people don't realize what the missing part is.

  10. Re:3 words from Oracle to existing VI customers... by jd · · Score: 2, Funny

    I thought it was "Emacs, Emacs, Emacs!" or "Developers, developers, developers!"

    --
    It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
  11. Re:So.. by assert(0) · · Score: 2, Informative

    The new google? Anachronicity alert!

    Oracle:

    Type Public (NASDAQ: ORCL)
    Founded California, USA (1977)

    Google:

    Type Public (NASDAQ: GOOG)
    Founded Menlo Park, California (September 4, 1998)

    --
    (founded 95,000,000 yrs ago, very space opera)
  12. Re:But Open Source if flakey and you cannot rely.. by oldhack · · Score: 3, Funny

    Hey, if the shit's got shit, it's got shit.

    --
    Fuck systemd. Fuck Redhat. Fuck Soylent, too. Wait, scratch the last one.
  13. Re:They made the product even more virtual by fishbowl · · Score: 5, Insightful

    >The product allowed people to eliminate physical boxes and still run dozens or hundreds of logical servers.

    For us, ESX is the difference between needing a new contract with our electical contractor (hundreds of thousands of dollars) versus working with our current power capabilities. It's not about the host machines, the licenses, or even the sysadmin workload. It's more about the power supplies and cooling the racks than anything else.

    --
    -fb Everything not expressly forbidden is now mandatory.
  14. Re:Totally in the s--? by ckaminski · · Score: 2, Insightful

    This is going to drive Oracles VI customers right into Citrix's hands, who also have a VERY compelling Xen based product, and I think the original Xen guys themselves.

    Citrix should be ALL over this.